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What’s the best reason for reinventing your business model?

Many of us recall David La Piana’s Nonprofit Strategy Revolution, which pushed past our traditional notion of strategic planning and brought more time-sensitive, relevant thinking to the forefront. La Piana acknowledges that even while Revolution was being published, clients began to raise the common questions surrounding the economic and operational implications of strategic decisions. Specifically, how could they effectively connect their strategy with an execution plan that would truly grow the organization? Answering this question involved developing a rigorous methodology for connecting mission, strategy and execution.

The methodology described in The Nonprofit Business Planroots strategic decision making in a strong financial analysis. Known as “DARE2 Succeed,” the principles in the methodology have been repeatedly tested in La Piana’s consulting practice to ensure the book represents practical and workable approaches to improving your organization’s outcomes. I asked coauthor, Lester Olmstead-Rose, about the most common reasons for pursuing a new business model. I loved his answer so I’m sharing it with you.

CausePlanet: You explain every nonprofit should engage in ongoing strategic planning but the “deeper dive” of business planning depends upon your circumstances. What is the most common reason nonprofits should consider formulating a business model?

Olmstead-Rose: The most common need for business planning is when you know or discover your business model is broken. An obvious example of this is when you can’t pay for what you are doing and you need to come up with a new approach to pay your bills.

We had an executive director come to us who had a really descriptive phrase about why she wanted to enter into a strategy development process followed by business planning. She said, “I can’t keep raising a million and spending a million!” Isn’t that what so many nonprofits do, living right on the edge all the time and under constant threat of collapse? It means their economic logic isn’t working; they haven’t created a good mechanism to pay for the extent of work they have taken on. But in considering a broken or stressed business model, don’t forget it is not just a question of money. Any part of the scope of your program or organization may be challenged–for example, the population you serve has changed dramatically or your geographic reach is too big or too small.

Beyond addressing a problem in the business model, business planning is also a great tool to use when thinking about expansion. We get organizations coming to us saying, “We do this great work, now we want to take it to scale.” Business planning can identify the avenues for doing that and let you know if it’s viable, or if you’re going to lose your shirt and undermine the good you’re already doing.

We’ve had an organization approach us that wanted to start a capital campaign to build new facilities and then use those new facilities to both expand current programs and start new work. Business planning is a perfect approach for them to make sure they can sustain those programs in the long run.